THIS WEEK ON U.S. FARM REPORT
OCTOBER 8-9, 2011
JOHN’S OPEN: Hello and welcome to U.S. Farm Report, I'm John Phipps. One curious difference between my generation and those following is our relationship with wristwatches. My sons haven't worn one is years, as they use their phones to tell time. When the strap broke on my work watch last month I decided to get with the trend and go watchless. It's not going well. Not only do I still glance frequently at the pale circle on my wrist, the act of drawing my phone and activating it seems cumbersome. I miss the ability to measure time geometrically, as the hands move, rather than doing arithmetic. And without Rolexes and Tagheuers, how will we signal our success now? Wrap a wad of cash around our wrists? Time now for the headlines.....here's Al Pell.
FIRE RISK: Thanks John. Farmers in the western Corn Belt are being urged to take extra precaution this harvest season because of the risk of fire. Our partners at AgWeb have received numerous reports of field fires in Iowa and Nebraska over the past week. In many cases, dry crops are getting ignited by combines.
NEBRASKA FIRE: Firefighters believe a fire in a Nebraska soybean field may have been started by a combine. The fire - aided by strong winds - burned through at least 40 square miles near the town of Stapleton. Firefighters from as many as 60 departments across Nebraska were helping fight the fire.
CORN PROGRESS CROP HARVES: Because of dry weather, Iowa farmers are getting ahead in the corn harvest. As of Monday, 12% of the crop had been picked. And with dry weather this week, Iowa farmers had a big opportunity to get a lot of acres in the bin. We talked with a farmer from south of Des Moines who enjoys the conditions. Joe says yields have been decent, in spite of the weather challenges this season. They had over a foot of rain in the spring. Then the showers turned off in July. About a quarter of the nation's corn has now been harvested. That's just a bit off the average pace. Harvest in the eastern Corn Belt seems to match planting - delays. Farmers in Indiana, Ohio and Pennsylvania are anywhere from 10-20 points behind average.
COTTON HARVEST: Now to the cotton belt. 16% of the nation's crop is now picked. That's behind the five year average by two points. The biggest delays are in Arkansas and Mississippi, but Louisiana farmers are nearly done.
CAROLINA COTTON: In North Carolina, 9% is now headed to the gin. Frank Howey is assessing his first-ever cotton crop. Howey says attractive prices last December enticed him to attempt a crop this year, so he planted 215 acres. It rained five straight days recently, which didn't help an already tough year. USDA's latest crop progress report shows 42% of the nation's cotton crop is rated poor or very poor. Another 29% is rated fair.
CROP WATCH: Crop watch begins in south- central Minnesota. The growing sense that fire danger there is high as Al alluded to. This farmer finished harvesting soybeans on Thursday the yields have been disappointing. Our second stop is in Soda Springs in Idaho where farmers have been reminded that winter is at our door. Soda Springs is in the far northeast corner of state and, while tillage is getting behind. As of Monday 30% upon have been completed and last year it was 40% by now. The average is 46%.
ROUNDTABLE: Our roundtable guests for U.S. Farm Report are Mark Gold and Jim Bower, what happened to us on Friday. The market had acquired data we did see some pressure on the market, corn was down about two and beams down 2.75, wheat was thought to have the quarter, but we did see a strong bid for spring wheat again, i don't have the settlement but it looked like December. Minneapolis closed around 19 and happened up to 23 and out for the day after the good week. So the markets are being led by the spring we contract to the north. Looking at prices the last two weeks seems like they didn't hardly move. But at the heartbreak in the market, and we have managed to rally this week to little bit off of those lows but we are facing a lot of harvest pressure here and a lot of news, some good and some bad. Some of the good news is, it looks like they cut there corn acres by about 400,000 acres and that was the look at corn and wheat. Then on Friday the Ukraine Parliament voted to remove taxes on their feet and the corn and that had been negative effect on Friday. We also had some harvest pressure for the weekend so we have to get through harvest before this can turn around. And some of the western states harvest seems to be going well but still slow in Indiana and Ohio. I don't know that I would agree with that. Every field had a combine in it that I have seen here just recently, but I think in unison with Mark's comment, I think what this last two weeks has told us, as traders and producers and investors, this is unquestionably what we call the picture market. Personally I feel that at least 50% of the demos that we saw was due to what we call outliers. The name of the weakness that we have seen in the banking system in Europe. The slowdown in China with our economy, if I have seen large- scale massive commodity funds that are set to break at nine with failover selling, and this makes the market structure from this point on more sensitive to that situation but certainly, as the trader, you have to look at these outside factors. Each huge component of price discovery. In today's market you can't look at the supply and demand. So many farmers are looking at the acres and certainly some rough crops out there. Take the national foreign account where we are now whether it's 147-148, it's hard for them to want to sell anything knowing we have lost bushels. The yield stories have been all over the road. Especially the foreign and non- code, corn acres. In northern Iowa we had frost damage and some problems there but now we are getting into very dry weather in southwest Minnesota and into the Dakotas and Nebraska. We talked about some of the fires in Nebraska. So it hasn't been an ideal year, the American farmer is looking at seven half dollar corn and $14 being spent didn't think we could break into the harvest because of all the drops. It is more than just supply and demand that you pointed out effectively that this still plays every part of this whole thing next. That it will fall on time. If there is the surprise, within the government do a lot of strange things lately. You don't think the government will try to surprise us? Well I think they have done what they wanted to do, to get these charges cheap enough so it doesn't compare to what we saw four or six weeks ago. Well again, look at the report this week and it’s another 40 or 50 higher or more. Some of the things over the years like beef cattle has made it different. I think in unison like that, but then we are saying right now which is the surprise to me is, or revert this is great which is extremely strong for this time of year in the Midwest, meaning to me that the corn that is being shipped off of the gulf is in high demand right now. And on the last series of exploits, we saw happen, heavy good by the Haitian markets and Mexico, and it looks like in this break, producers and buyers may be saying, we should take the look of this smaller. But as Mark said, this crap goes to the band and wants to go as planned, that's it for a while. When we come back, let's talk about what's happening internationally without crops. We will be back momentarily. Our guests here tonight, Mark Gold and Jim Bower, just before we left we were talking about international trade and how important it is. What do you see in the future for either culture at these prices and international trade. Moves and strong demand from China over the next 12 months and we have had a decent crop there, but, certainly, a lot of people including myself believe that China could be in the fire out there. But we will face a lot of competition from around the world. The world will need plenty more corn. And, we will see a lot more acres come into production in my opinion. And it will be pretty tough to have as good of a year as we have had the last two years as far as weather goes. I think over time we will produce more in the world, there will be good demand out there particularly for China on the grain. OAM at the fundamentals Jim was talking about, some have had major effect on these markets. A lot of things have been going through a lot of heat, and a lot of these hedge funds, they have for some of these hedge funds out of these positions trying back on the financing of these hedge fund deals. That tells me that someone -- some of this bull market hysteria that we have been seeing may not be as prevalent as it has been in the past. So you don't think the hedge fund money will be there next. That will be there but we are certainly going down with some of that ability to move these markets higher. The long-term it's not an opposite factor. Jim, your comments quick. Well in unison with that, I think we have already shifted out of their focus from the northern hemisphere to the southern hemisphere already. We have seen some dryness in the center west regions of Brazil, and easiness with this blending of power which is still kind of hanging around. We know that as long as sleeping state along public about the --keeping up that extended the fourth scene, although it has put down dramatically from where it was even five years ago. So plant more acres. Yes, but we may not have it as much as we thought it would be a few months ago. The Brazilians and Argentinians are different. If it doesn't go right now they are hesitant about taking the risk ahead. I think the big factor that will underpin this market is, if, when and where the changes come back into the U.S. grain markets, particularly corn, and purchased up small enough, but build up those stores. The Chinese have power and enough transportation capability and storage capability and they are tremendous recognizers of value. When they come in, they can actually form their own bottom by themselves. So what we're doing with that power trading is trying to concentrate by watching the commercial positions and ranking themselves in the market and trying to figure out the place where we think, value standpoint that commercials will try to put in before the Chinese come in. One of those things in addition to what Jim was saying is, they understand that as well as anybody out there. And with the banking system, he bequeathed to the standpoint in Europe. I think one reason the Chinese haven’t wind up till now is they are concerned with what is happening in Europe. And whether it's Greece, Italy or Spain, they can buy this an awful lot cheaper if there is a collapse out there. So I there is certain value to these prices. I wish we had more time to talk about this but we have overused our time. We will be back with the U.S. Farm Report in just a moment.
JOHN’S WORLD: It hasn't been much fun for farmers checking the markets on their smartphones this fall. While most of us expected corrections and fluctuations, few anticipated the dramatic drops we have witnessed as we simultaneously watched wild yield variances. But some economists are starting to argue that the increased volatility isn't a bug of our system, it's a feature. Just like how minor temblors help relieve geologic pressure and postpone massive earthquakes, wider and more frequent price swings may be needed to prevent catastrophic market failures. If this is true, and I find their arguments persuasive, farmers will need different marketing tools and strategies to cope. Escaping wild markets will be very expensive and those who try to "insure" their future will sacrifice much of their potential profit. Volatility raises the price of insurance. One look at option prices compared to a few years ago will demonstrate that fact. But it is on the emotional level that this adjustment will most productive. One simple step might be to practice identifying what enough looks like. We hate leaving money on the table, but chasing fleeting market highs leaves us open to settling for market lows as well. Grain farmers have not seen a sustained run of profitable prices like this in my time at least. Clearly our market habits will need updating. And one good first step is to identify a price that we can live with, if not brag about.
JOHN’S OPEN: Hello and welcome to U.S. Farm Report, I'm John Phipps. We have reported on three pending free trade agreements for years. These important treaties became hostages or at least levers for other issues, complicating the approval process. Even relatively straightforward legislative actions have been slowed by political gamesmanship, but it could also be that in our complicated global economy such agreements simply will take more time than we expect. Patience is not a familiar virtue in our split-second world, but I suspect it will have an increasing payoff. Let's get started with the headlines and Al Pell...
WORLD DAIRY EXPO: Thank you John. The dairy industry gathered this week for one of its biggest shows. And based on attendance alone, the dairy outlook is promising. The annual World Dairy Expo draws over 65,000 dairy producers and industry representatives from 60 countries to Madison, Wisconsin. More than 2,500 head of dairy cattle from 37 states and seven Canadian provinces are registered for the show. The general manager says those numbers reflect optimism in the industry. U.S. milk production grew this year mostly on the back of robust exports. U.S. dairy exports were at record volumes in the second quarter of 2010, up 58% by volume over year earlier.
FREE TRADE AGREEMENTS: Three un-finished free-trade agreements have now made it to "the hill". The White House submitted to congress the pending FTA's with Colombia, Panama and South Korea. For many sectors in agriculture, it's a long time in coming...about four years. Free trade agreements eliminate tariffs on the sale of goods and services across international boundaries. Agriculture Secretary Tom Vilsack says these agreements will level the playing field and secure markets for America’s farmers, ranchers and growers.
ICE CREAM SURPRISE: Many of us will take a scoop of vanilla and a scoop of chocolate in the same bowl, because we enjoy both flavors. But imagine if you could get the two distinct flavors in the same bite? Researchers at the University of Missouri are studying "flavor release" ice cream. For example, you take a spoonful of vanilla, but then a second flavor becomes apparent before you swallow that first bite. Scientists use a process called "micro-en-cap-soo-lation" to create the treat. The process has been around for a couple of decades, like in chewing gum. It involves covering flavor compounds in a wax or gelatin that is just millionths of a millimeter in thickness. Researchers say it could give ice cream longer shelf life.
HEARTLAND: Have you checked your mail lately...any chance you checked for it in your garden??? Horticulture experts in the Volunteer State have designed a unique display where old mailboxes are mixed with vines, flowers and plants. In this report from the University of Tennessee, Chuck Denney shows us how imagination can open a beautiful box of possibilities. Chuck tells us old bicycles have been used in a similar display, with vines and plants growing around the wheels and handlebars.
BAXTER BLACK: It's story time now from Baxter Black. This week, Baxter tells us what happens when an Illinois cowboy is called in to help track a wayward animal...When we come back, we're off to Wisconsin for tractor tales plus we'll have our country church salute...please stay with us.
TRACTOR TALES: We traveled to the Badger State for a look at a one-of-a-kind Moline. Mecum auctions hosted a tractor and memorabilia event in Walworth, Wisconsin. Hundreds of tractor enthusiasts gathered to see what might spark their interest. It's there we met a collector with some unique equipment. We wanted to share with you some pictures we received recently. This is Cliff Alder from Audubon, Minnesota and his 1935 Farmall. Cliff was 18 years old when he purchased this tractor and has used it ever since. Here you see Cliff's grandson, David, sitting on the tractor. He claims the tractor will eventually be his. Thank you Cliff and David for sharing your tractor with us.
CHURCH SALUTE: We begin in Laporte City, Iowa. Zion Evangelical Lutheran Church is celebrating 150 years. Seven German immigrant families started the church in 1861. There are about 80 descendants of those founding members who still attend. The current church was built in 1901. During the summer months, the church holds a "drive your tractor to church Sunday." Sounds like fun, our second salute goes to the Lewistown Methodist Church in Logan county, Ohio. It's celebrating 175 years of ministry. Founded in 1836, the pioneer congregation was served by a circuit-riding pastor who went on horseback to the various established churches. As a testament to their faith, Lewistown Methodist started the first homeless shelter in the county. It's also a key player in a local church-cooperative which operates a food pantry. As always we want to learn about your home church as well... Salutes can be sent to the address on the screen. Stay with us - the mailbag is next.
MAILBAG: Time now for our weekly look inside the farm report mailbag....Vince Mattson, in Chester, Montana disagrees with my opposition to farm subsidies: “...we certainly don't need people that are "supposed" to be pro Ag to be giving politicians reasons for cutting programs that keep America the cheapest food source in the world." Vince had other objections to my position, but I want to comment about the idea that being pro-Ag necessarily means being pro-subsidy. Only few crops get subsidies, and livestock producers certainly get along without them, so in fairness, I think we have room in our profession for a range opinions on subsidies. Secondly, your assertion America is the cheapest food source is wrong. The statistic constantly quoted is the average American spends less of their income than others around the world. This is more the result of comparatively high incomes, not our food prices. Many farmers, especially in marginal production areas, claim they can't operate without a federal check. I think we're about to find out. Both sides of the aisle are gripped by budget-cutting fever, and farm subsidies are one of only two budget items most Americans agree should be cut. My opposition to farm payments has been fruitless to date, but I am open to compromise. How about means-tested payments that go to you and not me? As always, we want to hear from you, send comments to email@example.com or leave us a voice mail at 800-792-4329.